- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 8. Currency Exchange Rates: Understanding Equilibrium Value
- Subject 3. A Long-Term Framework for Exchange Rates
CFA Practice Question
Which theory states that the expected change in a domestic currency's value should be fully reflected in nominal interest rate spreads?
A. ex ante PPP.
B. Uncovered interest rate parity.
C. International Fisher effect.
Explanation: Based on the theory, the country with the higher interest rate is expected to see the value of its currency depreciate.
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